With a cellphone and Skype, who needs Bezeq?

Tali Band, a student at the Technion-Israel Institute of Technology in Haifa, has no Bezeq telephone line in the dorms, and she isn't thinking of getting one. She has a cell phone and Skype - and that's enough for her. "I've been using Skype for a month," Band, 24, says of the free voice over Internet protocol (VoIP) program, which more than 64 million people have downloaded thus far.

"All my friends from school and outside school use the program, and we `give someone a Skype' instead of `making a telephone call.' People still say `I'll call you,' but they usually mean Skype - not a Bezeq telephone."

Her friend, Dina Leibowitz, 24, a fellow student at the Technion, also makes do with a combination of Skype and her cellphone. She sees no need for a Bezeq landline. Since downloading the software from the Internet last summer, Leibowitz's cellphone bill has shrunk substantially, and "since the people I contact the most have almost all connected to Skype, I barely talk to them on the phone."

Leibowitz says her cell phone is a must, but connecting to a Bezeq landline and paying monthly fees doesn't pay. "The main disadvantage of Skype is that the program is a burden on the computer. If I run a heavy program simultaneously, the conversation can be choppy. Another big disadvantage is that it's time consuming because it's free," she says.

Telecom operators long have been troubled by the massive use of Skype for overseas calls. Now it turns out that many are using the service for domestic calls as well. After establishing itself toward the end of 2003 as the hottest application on the Internet, at the beginning of 2004 the company launched Skypeout, which enables people to call regular phone numbers anywhere in the world. The service is not free, but the rates are fairly attractive given that Skype does not charge a flat monthly fee.

There are numerous VoIP programs and products, including Microsoft's instant messaging (IM) program, which comes with the Windows operating system. So why has Skype become synonymous with Internet telephony? First it's free and does not require the purchase of any device such as a microphone. Second, it has a unique quality: it is based on the P2P (person to person) code so that call routing is not handled by central servers, but rather divided among users connected to the system at that moment. The more users connected, the better the sound quality. Sound familiar? Those behind this enterprise are the same ones who brought Kazaa - the file sharing network that has sent the music and film industries into a frenzy in recent years.

Eran Sudek, a 27-year-old electronics engineer from Tel Aviv, has no Bezeq phone at home. When Eran and his girlfriend moved into their apartment a year ago, they decided to forgo a Bezeq landline, "because we saw no justification for the rates they charge, especially since we don't talk much on the phone, and when we do, it's usually to call cell phones."

They use their cellphones and Skype to make calls. Sudek emphasizes that Skype is not ideal: There's a delay effect, and the sound quality is not great. Nonetheless, he was surprised by the sound quality on a Skype call he received a few days ago on his cellphone from his sister traveling in Argentina. "I still don't use Skype for chit-chat, but for `administrative' calls it's fine for me."

For now, Sudek is not considering connecting to Bezeq. "They charge high usage fees and that doesn't pay. Skype is a little cumbersome to use, because you have to turn on the computer and wear earphones, but I think it will ultimately gain a real hold. Bezeq will have no choice but to adjust its prices. Its pricing model bothers me, because it charges a high monthly usage fee that has little connection to actual usage," Sudek says.

Bezeq, the company likely to be hardest hit by massive use of Skype and similar companies, said it "is well aware of the matter, but, all enthusiasm aside, it should be remembered that the technology still has quite a few limitations, such as the need to stick by the home computer during a phone call, and the sound quality, which is not great at the moment." Bezeq also says that "using the software, at the moment, is mostly for a public that understands computers and how to operate them, and mostly for international calls. In any event, it cannot be a substitute for the home telephone line."

David Kaufman, a 32-year-old journalist from New York who has lived in Israel during the past six weeks, agrees in part. "I heard about Skype for months, but I was skeptical. But after using the program for the first time, I immediately became hooked. It doesn't matter where I am in the world, as long as I have fast Internet access, I can talk to any Skype user or anyone with a regular phone without difficulty and cheaply. It's the perfect tool for the global wanderer, but for now, my biggest problem is that I will never be able to persuade my mom to use it. She prefers calling me on her old phone."

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